If government spending is left unchecked against a backdrop of falling oil prices and calls for fiscal cutbacks, the country could face dire consequences, two of them being major shortfalls in revenue and the devaluation of the T&T dollar.This was the warning coming from four economists, Dr Lester Henry, Dr Ronald Ramkissoon, Mary King and Dr Roger Hosein, who questioned whether the Government had a plan for revenue generation other than gas and oil.
Global oil prices has reached US$60 a barrel. President Anthony Carmona cancelled four functions for the Christmas season, Petrotrin cancelled its Christmas function, and the Sport Ministry also postponed its awards ceremony, following Finance Minister Larry Howai's mandate to ministries to cut back on expenditure by $45 million.
Prime Minister Kamla Persad-Bissessar has distributed thousands of dollars in toys to children across the country, disbursed $55 million to churches, $2 million for Sparrow's museum, left the allocation for Carnival unchanged, increased PSA wages by 13 per cent, and increased teachers' wages by 14 per cent.
Henry: Complete lack of leadership
Speaking to the Sunday Guardian last week, Henry said, "There seems to be a disconnect with the Prime Minister and the Government."She seems to have her own plan that is different from the President and others and as far as she is concerned, that doesn't have anything to do with her."Howai is calling for fiscal management, cutbacks and belt tightening. You see mixed messages or two separate signals coming from Government.
"They're not going to belt tighten too much, however, in the run-up to elections. They haven't been able to do it in four and a half years and they're not going to do it now. "The Government was spending on oil and gas prices that were higher than average and other than that it had no other plan."
When asked what was his opinion on Persad-Bissessar's leadership in this time of economic crisis and in the light of the uncertainty over unstable oil prices, he replied that there was a complete lack of leadership in the face of the many serious issues that would confront the country in the next six months.Henry said if the price of oil continued to fall over the next few months, T&T would face major shortfalls in revenue.
He said the Government had signalled that it planned to borrow and use revenue generated from the sales of state assets such as Phoenix Park to raise $1.5 billion, to make up for the budget shortfall, regardless of the consequences.Henry said the lack of revenue-generation policies would come back to haunt them.
Ramkissoon:Govt caught between a rock and a hard place; elections and falling income
Ramkissoon, meanwhile, said the Government and country were caught between an election on one hand and falling income on the other, and falling income necessitated certain strategic measures including cost cutting.He said a fall in energy prices and income meant certain hard measures had to be taken that were, however, in the best long-term interests of the country.
Ramkissoon said the democratic system required that elections be held before September 2015 which placed the Government in a dilemma since it would wish to win another term in office.He said on one hand, what the population was seeing from Persad-Bissessar were initiatives to secure an election victory, but what was also required were measures to cut back and adjust to falling income, as Howai had indicated.
Ramkissoon said there appeared to be a divergence in the pronouncements of Howai and Persad-Bissessar.He said mixed messages were coming from the Prime Minister at a time when strong leadership in terms of fiscal management were required, and that could cause the Government to lose the election.Ramkissoon said the situation was not unique with this administration, albeit it was a contentious issue.
He said we could think back to 1986 when there was a similar predicament where oil income had been falling for several years and hard decisions had to be taken.
Ramkissoon said the government of the day hesitated to make the deep kinds of cuts that were necessary and the country saw a new government, the NAR administration, coming into office and having to make serious cuts and adjustments over its entire five-year period.He said the citizenry could run but could not hide from falling income.
Ramkissoon said the wage increases, grants and giveaways seemed to be really with the elections in mind rather than any action to deal with the economic difficulties which the country faced.He said strong leadership was very critical at this time and could mean the difference between success or failure at the polls.
Mary King: Govt think its prudent torevive the local economy by spending
King said the Government came into office just after a global economic collapse due to oil hitting a price of US$147 per barrel and natural gas US$14 per thousand cubic feet, a situation aggravated by the subprime mortgage fiasco. She said as the world struggled to recover, the Government thought it prudent to try to revive the local economy by spending.
King said the world was in recession and many were now predicting a double-dip recession, especially for T&T since both oil and gas prices had collapsed and as a result local economic activity was reduced.King said oil production had fallen to the lowest ever and the country had been unable to meet the demand for gas from the Pt Lisas processors for three years in a row.
Hosein: PM should have trimmedsome Carnival expenses
Hosein said the decision to cancel four Christmas functions given by the Office of the President was well-received and provided sound leadership from a top office.He said from this perspective, perhaps the Prime Minister should have marginally cut some of the Carnival-related expenses, if only by five per cent, to send a signal indicating a "new normal" as it concerns government expenditure.
Hosein said perhaps these signals would be evident in other activities later in the year, as indeed the country needed to acknowledge that resource flows from the main hydrocarbon sector were not where they should be nor were they likely to be in the medium two-to-three-year period.